This is part 3 in our series on calculating the ROI of a cloud migration.
Now that we know how important it is to identify and include hidden costs, and now that we know that it is indeed possible to quantify many intangibles such as elasticity, time to market, agility, customer engagement, and so on – it’s time explore how to package all this into an ROI presentation that will get the check signed.
This is what the value-based approach is all about.
But first, let’s dive into an example that illustrates the importance of the value-based mindset and how it can help us create the value-based cloud migration ROI and presentation.
In a Harvard Business Review (HBR) article, the following four pillars of the value-based pricing mindset are provided:
- Focus on a single segment
- Compare with the next best alternative
- Understand differentiated worth
- Place a dollar amount on the differentiation
Now, let’s see how each pillar leads to the value-based cloud migration ROI:
Focus on a single segment. This is basically the same advice we hear often from architects and coachers – break down big tasks into lots of smaller tasks. For each application or area of the business, e.g. billing or ordering, create a case that is specific and detailed for that domain, so each can be clearly articulated and more easily understood (and justified) by management.
Compare with the next best alternative. According to HBR, value-based pricers always ask the question: “What would this segment buy if my product wasn’t available?” In the case for value-based ROI builders – the question to ask and answer is: “What would doing X cost me if the cloud migration project was axed?”.
Understand differentiated worth. For pricing, this relates to the need for figuring out which product features are unique and differentiated from the competitor’s offering. For you, this means figuring out the differentiated services and products you can offer or the capabilities you can acquire only by migrating to the cloud.
Place a dollar amount on the differentiation. Estimate the annual revenues that can be gained from the differentiated products and services that are only possible to offer if you are running on the cloud. You can also estimate the cost of not having the capabilities that the cloud enables.
In short, to translate the value-based pricing mindset into practical actions that can be taken when creating your value-based cloud migration ROI:
- Make sure the data presented is specific to relevant apps/business domains
- Present the costs of various projects (not just equipment) on-prem vs. in the cloud
- Present the offers, packages, promotions, services, products and capabilities that are not doable on-prem
- Quantify the annual revenues that will be lost if cloud isn’t adopted
The value-based sales pitch
Shifting the mindset of cost to value is likewise a key pillar in how successful sales professionals engage with prospects and can be very instructive for positioning the cloud migration project with leadership.
The first step to take before sending the meeting invite to present your ROI, is to make sure you fully understand the business priorities of the specific stakeholders to whom you will be presenting.
These priorities may include a wide range of issues, depending on the persona. And while they will almost always include cost reduction, they will also include concerns that are specific to the stakeholders reviewing the ROI presentation.
These can range from decommissioning a data center to increasing uptake in self-service channels, faster feature delivery, increased automation, increased agility, operational resilience and security among others.
Each strategic objective must then be correlated clearly and convincingly to the value of the cloud. Each claim should also be substantiated by quantitative evidence on how the cloud migration will accelerate objective achievement.
It should also be shown how not going to the cloud will impede the effort and may have a dire effect on desired KPIs. In short – make sure to research your audience in advance and speak directly to their business goals.
Always be selling
A key point here is that the ROI should never be treated as a pure numbers exercise – a spreadsheet that is attached to an email and sent off, while you cross your fingers and wait for the answer from the keepers of the funds.
Presenting the cloud migration ROI is a sales task that requires implementing sales-related best practices.
The first and most important one is – know your audience. As mentioned earlier, it is critical to make sure that you fully understand the business priorities of the stakeholders to whom you will be presenting.
Another best practice is to use the lexicon of your stakeholders and hit them squarely in the middle of what’s most important to them.
Additionally, work these key messages into your presentation:
- Tie cloud migration benefits directly to stakeholders’ business objectives (vs. technology-centric goals).
- To add a bit of sense of urgency, you may also want to include some facts about where your three closest competitors are on their cloud journey, and how not catching up will impact competitiveness.
- Introduce business specific (rather than operations specific) objectives and KPIs that you have targeted for the first-third-fifth year following the migration, to demonstrate a commitment to the delivery of cloud-enabling business value.
- Suggest a roadmap of checkpoints with stakeholders to reflect accountability and to encourage active participation in tracking progress and success.
So, now that you have these important tools in your ROI toolbox it’s time to go ahead and put together that ROI and presentation. But, first, we have some more insights to offer. To learn more about how to build the value-based ROI, we invite you to download our whitepaper, Evaluating the ROI of Cloud Migration”.